Supreme Court Rejects Liability for Foreign Corporations in International Human Rights Cases

In a classic 5-4 split, the Supreme Court ruled today that foreign corporations cannot be sued for egregious human rights violations under the Alien Tort Statute (ATS). Here is our fast-and-dirty take on the opinion. In short: the majority’s opinion appears to have more to do with market fundamentalism than the administration of justice, and sets a problematic precedent for victims’ access to remedy. There's not much left of the ATS after this decision, and it lays the framework to eliminate liability even for domestic companies. In the wake of opinions like Citizens United, this gives corporations the rights of personhood, but without the responsibilities.

Briefly, the facts: several thousand victims of terrorist attacks overseas sued Arab Bank, a Jordanian financial institution, alleging the bank had facilitated payments to terrorists. The only connection to the US is that the transactions came through New York. While there is a reasonable argument that this case doesn’t have enough connection to the US for US courts to have jurisdiction, the Court made a sweeping ruling based on these limited facts that will harm other plaintiffs bringing cases with much more connection to the US going forward.

Justice Kennedy wrote the majority opinion. The conservative justices could have affirmed the lower court’s dismissal of this case based on the Court’s 2013 Kiobel v. Royal Dutch Petroleum decision, finding that the case did not “touch and concern” the United States with sufficient force to displace the presumption that US law doesn’t apply overseas unless Congress so states. But that would have been too easy.

Rather, they decide to extend Kiobel, so that not only do these human rights cases need to “touch and concern” the US, the defendant cannot be a foreign corporation. One of the most fascinating (and troublesome) aspects of this opinion is that most of Kennedy’s reasoning extends to all corporations, not just foreign. Kennedy relies primarily on the argument that there is no corporate liability under international law. This question has been heavily litigated and there are good arguments on both sides we won’t take up here. But at root, since the Court finds this to be the case, the distinction between US and foreign corporations in the opinion is meaningless. The next time the ATS comes before the Supreme Court, I imagine it will be a case against a US company, and the defendant will argue powerfully that this opinion forecloses corporate liability altogether, not just for foreign companies.

Kennedy also relies on the separation of powers, arguing that it should be Congress’ role to determine whether corporations are subjects of the ATS. Given the foreign policy problems raised by adjudicating foreign corporations, Congress should weigh in, using their foreign policy expertise, and pass a statute that addresses this. We’re all big fans of democracy, so we generally like it when one branch understands it’s time to defer to another. Here, however, this seems a little disingenuous. He writes “Congress is well aware of the necessity of clarifying the proper scope of liability under the ATS in a timely way.” Let’s get real: Congress will not pass legislation allowing victims of overseas human rights violations to bring suits in US courts against corporations in the next five years. Or ten. The Court could be genuinely saying Congress is better suited to handle this, or they could be using this as a graceful excuse to justify their position, with the full knowledge that Congressional action on corporate accountability is not going to happen. We’ll leave it to the reader to decide.

He also finds that “Congress’ decision to exclude liability for corporations in [Torture Victim Protection Act] actions is all but dispositive in this case.” This is interesting, because the Torture Victim Protection Act is a different statute, with different wording. Sotomayor takes this up at length in her dissent, so check it out for more context on why the TVPA does not settle this question.

But what really jumped out was Kennedy’s appeals to market fundamentalism, or the belief that the market, if left to its own devices, will solve the world’s problems. Specifically, Kennedy equates foreign investment with improving human rights. I’m not saying there are no benefits to foreign investment, but foreign investment without safeguards for workers and others affected by supply chain abuses doesn’t do a whole lot to improve human rights, and in many cases worsens it.

Kennedy doesn’t see it this way. He writes “[A]llowing plaintiffs to sue foreign corporations under the ATS could establish a precedent that discourages American corporations from investing abroad, including in developing economies where the host government might have a history of alleged human rights violations, or where judicial systems might lack the safeguards of United States courts. And, in consequence, that often might deter the active corporate investment that contributes to the economic development that so often is an essential foundation for human rights.” His fear that such cases would “‘hinder[] global investment in developing economies, where it is most needed’,” is frankly an astounding justification to allow corporations to avoid liability for torture.

Let's pause there: human rights will be upheld in the long run if we avoid holding companies accountable for egregious violations in the short run. That argument is probably easier to make when you're sitting in a cush office at the Supreme Court than if you're a member of the Ogoni community of the Niger Delta, or a Colombian union or social movement leader.  But I digress. 

Justice Alito writes a concurring opinion to put a finer point on the separation of powers argument, as well as underscoring the risk of “diplomatic strife” posed by these cases. Of course, there are a series of federal doctrines that exist to deal with potential diplomatic strife, and many an ATS litigator has lost a solid case thereby. Since those doctrines exist, these concerns are ill-placed here. (Alito and Gorsuch also both suggest that Sosa was wrongly decided, but I’ll leave that for now.)

The dissent, authored by Justice Sotomayor and joined by Justices Kagan, Ginsburg and Breyer, is an exhaustive takedown of the views of the five conservative justices. Sotomayor argues that the question of whether corporate liability exists under international law is misplaced, as “enforcement is not a question with which customary international law is concerned. Although international law determines what substantive conduct violates the law of nations, it leaves the specific rules of how to enforce international-law norms and remedy their violation to states, which may act to impose liability collectively through treaties or independently via their domestic legal systems.”

The dissenting justices are particularly concerned with the idea of “categorically foreclosing corporate liability in all ATS actions” based on foreign policy concerns, when each of these concerns “can be addressed with a tool more tailored to the source of the problem than a blanket ban on corporate liability.” Indeed, the corporate liability question and the issue of causing strife with foreign governments are unrelated. A suit against a foreign individual, such as a former military or political leader, could equally cause diplomatic strife. As noted above, the foreign affairs doctrine and the political question doctrine, among others, are better tools to deal with this concern, and have no relationship to whether the defendant is a corporation or natural person. Further, a plaintiff has to obtain personal jurisdiction over the defendant in the United States to bring a case, so companies without operations in the US are unlikely to be sued here. But, as Sotomayor puts it, “the majority prefers to use a sledgehammer to crack a nut.”

The end of Sotomayor’s dissent is worth quoting at length here as she challenges the majority’s market fundamentalism in important ways:

There can be, and sometimes is, a profit motive for these types of abuses. Although the market does not price all externalities, the law does. We recognize as much when we permit a civil suit to proceed against a paint company that long knew its product contained lead yet continued to sell it to families, or against an oil company that failed to undertake the requisite safety checks on a pipeline that subsequently burst. There is no reason why a different approach should obtain in the human rights context.

Immunizing corporations that violate human rights from liability under the ATS undermines the system of accountability for law-of-nations violations that the First Congress endeavored to impose. It allows these entities to take advantage of the significant benefits of the corporate form and enjoy fundamental rights, see, e.g., Citizens United v. Federal Election Comm’n, 558 U. S. 310 (2010); Burwell v. Hobby Lobby Stores, Inc., 573 U. S. ___ (2014), without having to shoulder attendant fundamental responsibilities."

Oh yeah, Citizens United and Hobby Lobby. Good point Justice Sotomayor.  These days, corporations get to be people when it's politically expedient, but they don't have to be people when it counts.

So where does this leave us? The little bit of the ATS that was left after Kiobel is now almost gone. To prevail in an ATS case, the requirements you would have to meet include the following: (1) you must not be suing a foreign corporation, (2) you must be a foreign plaintiff, (3) you must have experienced a violation of one of a very small number of universally-recognized international norms (torture, crimes against humanity, genocide, etc), (4) the facts must “touch and concern” the United States more than the Chiquita case (US defendant, decision to fund foreign terrorists made at board level in the US), and (5) the case must not present foreign policy concerns.

But the odds of finding a plaintiff that can jump through all of these hoops are slim. As mentioned above, future corporate defendants could easily argue that Kennedy's reasoning applies with equal force to domestic companies, adding yet another limitation. 

In the absence of the ATS, we need new legal strategies for corporate accountability. That’s where CAL comes in. Since human rights law is embattled, we’re repurposing commercial and trade law to hold corporations accountable for their supply chain abuses. Check out our new IP tool, and kick us some cash to help us do this important work. Every little bit helps.

Charity Ryerson is a co-founder and legal designer for Corporate Accountability Lab.